Negative equity part ex

One of the most important things to remember when using a car as a part exchange that already has outstanding finance on it is that the outstanding balance of your car might be more than the car is worth. This is particularly the case if you bought it through a Personal contract purchase or Hire purchase schemes. Although, it’s not the end of the world of you do have outstanding balance; If you have outstanding finance on your car that you would like to exchange, there are several options for you to decide from.

Ask the dealer to settle it
The dealer can settle the car finance balance for you but do be sure to check whether there is an early termination fee for paying the loan early, in the terms of your contract. With this option the settlement value can be transferred to a new loan agreement for the car of your choice, potentially reducing the monthly repayment total for you to pay. Alternatively you could pay cash to your dealer to settle it as part of your new car purchase deal.

Settle it yourself
If you have the disposable cash, you can always settle it yourself. Under most car loan agreements you get a rebate of interest if you are paying the finance off early, which means that you will pay less in total. After you’ve paid your car loan in full, you can part exchange the car as normal without any debt against it. However, you will need to ensure that you got a written confirmation from your current lender, saying you have settled the financial agreement in full, to avoid any complications later on.

Keep on paying the agreement
If you have a personal loan agreement on your car, you could keep paying the agreement whilst opening a new car finance agreement on your new car. As long as your budget will stretch to two separate repayments each month and your credit score will allow, there’s no problem having two agreements in place. If you choose this option, it’s important to remember that the vehicles only become yours after the loan is paid off in full so you won’t be able to resell them or modify them until then.

What if you owe more than your car is worth?
When you owe more on your car finance than your vehicle’s current value – this means you have a negative equity. If you find yourself in this situation then the same options above are available to you. We can provide value vehicle finance for your new car and we can also beat dealer rates as we have an expert panel of lenders offering tailored deals for drivers with good and bad credit ratings.

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Representative example – excellent credit Borrowing 7500 over 4 years with a representative APR of 6.9% and a deposit of £0, the amount payable would be £177 per month, with a total cost of credit of £1,035 and a total amount payable of £8,535.

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  • Best available rate:6.9%
  • Total repayment 8,535
  • Total cost of credit 1,035
48 monthly payments of 177
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